Broker Decides: If You Can't Join 'Em, Beat 'Em

Chicago (MarketWatch) — Andrew Stoltmann Started Out as a Stockbroker. Now, He Sues Them

“I quit the securities industry to represent investors who lost money in the stock market,” he said, “because I saw how conflicted the securities industry really is.”

Stoltmann, 40 years old, has built a law firm with his own name on the door and three attorneys working for him. He’s represented hundreds of investors in lawsuits and securities-arbitration claims against brokerage firms including AG Edwards, Edward Jones, Merrill Lynch, Morgan Keegan & Co., Morgan Stanley, Prudential and Smith Barney.

Andrew Stoltmann’s Clients Range from Factory Workers to Pro Athletes

His clients range from factory workers to professional athletes, including Horace Grant, who played for the NBA’s Chicago Bulls for 17 years. Nobody, he said, is too big or too little to be taken by their broker.

I met with Stoltmann in his corner office, 35 stories above Chicago’s LaSalle Street. He smiled and laughed easily when discussing his two great passions, both of which inspire a certain amount of animosity in this town: 1. Rooting for the Green Bay Packers, and 2. Suing the pants off of investment brokerages.

Call him what you will. He’s been called it before as a frequent guest on CNBC and Bloomberg TV. And anyone who can live as a Packers fan in Chicago can withstand almost any insult.

“The securities industry always attacks the lawyers who bring these cases,” he said. “They say these guys are ambulance chasers. They’re bad guys. They’re only concerned about making money for themselves. That couldn’t be more ironic.

“Don’t defraud your clients, don’t almost meltdown the world economy, and you wouldn’t have these lawsuits and arbitration claims against you.”

He typically takes cases on contingency, investing his own funds on research, expert witnesses and other costs, and taking about a third of the winnings when he is successful. Most of his cases involve investments sold as conservative when in fact they weren’t. Misrepresentations, omissions, and unsophisticated investors sold sophisticated securities provide a steady stream of business.

“Most brokers are great salesmen,” Stoltmann said. “You don’t have to manage money well. If you can talk the talk, if you can solicit funds, you’re going to make a lot of money. … Most people think brokers are finance majors and MBAs, and they’re not .. There were guys I worked with who were literally former used car salesmen.”

Stoltmann talks fast for a guy who grew up in Milwaukee, Wisc. His father worked as the chief financial officer of a bank and his mother worked in sales. When he was 9 years old, he saw his father devastated by an $80,000 loss in a real estate investment.

“I saw what that did for the better part of 10 years,” he said. “We thought we were going to lose our house. My dad couldn’t afford to lose $80,000 back then. That was a huge sum, and he actually borrowed money to do it.”

After Stoltmann graduated from the University of Wisconsin-Madison, he his landed first broker gig at Olde Discount. “I got the sales side from my mom and the finance side from my dad,” he said. “So I thought being a broker would be such a cool job.”

He thought he’d walk in and they’d hand him a book of business and tell him to start researching stocks for a slate of needy customers. Instead, they handed him a phone book and told him to start cold-calling.

“Brokers spend about 90% of their time looking for new business, instead of trying to analyze the stocks, and looking out for what’s in the clients’ best interest,” he said.

Olde fired him, he said, because he had the temerity to complain about abuses he saw at the firm. Years later, in 1998, founder and chairman Ernest Olde, and two other top executives agreed to pay $7 million to settle Securities and Exchange Commission allegations that management practices encouraged brokers to defraud investors. And a year after that, Olde sold his namesake firm to H&R Block for $850 million.

From Olde, Stoltmann went on to Merrill Lynch, but left the industry in disgust in 1996. He didn’t fire off a “Why I am leaving” letter to the New York Times like Greg Smith, the former Goldman Sachs executive. Instead, he quietly enrolled in law school at DePaul University.

“If it’s not the lawyers protecting investors, who is it?” he said. “It’s certainly not the SEC.”

When Stoltmann graduated law school in 1999, his timing could not have been more perfect. “Every time we have a bubble it takes about five years for those cases to cycle,” he said.

He’s had the Internet bubble, the housing bubble and soon he’ll have the zero-interest rate bubble.

“When interest rates go up 200, 300, 400 basis points, as they are going to do, we are going to see a tsunami of claims like you’ve never seen before,” he said.

“They have so many little old ladies invested in junk bonds, invested in garbage, trying to get a 3%-5% return. When interest rates spike up, you’re going to see a huge number of retirees with huge sums of their fixed-income money, completely wiped out.

“It’s a mine field. It’s just a matter of time. Nothing has changed. I’m in a great, great growth industry.”

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